Productivity Analysis of Listed Islamic Banks in QISMUT Countries: A Malmquist Index Approach

Global Islamic banking is driven by the QISMUT countries (Qatar, Indonesia, Saudi Arabia, Malaysia, the United Arab Emirates, and Turkey), which have large Muslim populations and strong Islamic banking assets. This cross-country study compares the productivity of Islamic banks listed on QISMUT stock exchanges. Cross-country productivity analysis using the Malmquist Productivity Index (MPI), an extension of the Data Envelopment Analysis (DEA), remains limited, with most previous studies only analyzing productivity in each country separately. The analysis reveals a slight increase in overall productivity (TFPCH = 1.001), with gains mainly driven by efficiency gains (EFFCH = 1.017), while technological change (TECHCH = 0.985) lags, indicating the need for stronger adoption of innovation. The findings emphasize that productivity growth among these banks is mainly driven by efficiency gains, with limited technological progress. Therefore, Islamic banks in QISMUT countries should not only focus on improving operational efficiency but also adopt policies such as Al Rajhi Bank’s approach, which has achieved remarkable productivity growth. Al Rajhi Bank’s commitment to sustainability through the integration of Environmental, Social and Governance (ESG), along with its "Bank of the Future" (BOTF) initiative, which combines agile methodologies, robotics and data-driven insights, has simplified operations, expanded its digital footprint and enhanced operational service performance. Al Rajhi Bank offers a valuable model for other banks seeking to improve their productivity, competitiveness and long-term sustainability.